Writer‧Journal Weekly Editorial Team
“At some point, we have to keep interest rates higher to deal with longer-term inflation…; and that leaves less room for a ‘soft landing’!” December 14, 2022 EST Federal Reserve Chairman Jerome Powell said so publicly following the last interest rate decision-making meeting in 2019.
The shrinking space for the so-called “soft landing” means that in the coming 2023, the United States has a greater possibility of facing an economic recession.
The Fed sharply raised its 2023 unemployment rate forecast to 4.6% from 3.7% in November. “Such a high unemployment rate is usually accompanied by an economic recession.” Tao Dong, who accurately predicted the Asian financial crisis in 1997 and is currently the vice chairman of the Asia-Pacific region of Credit Suisse Private Bank, wrote in his private blog.
Time goes back to November. In the middle of that month, the well-known foreign investment bank Morgan Stanley (Morgan Stanley) released the 2023 economic outlook report. The title of the report is “Even Darker Before the Dawn”. “The global economy is slowing rapidly and we are on the brink of recession,” Bai wrote.
Not only did Morgan Stanley set the tone, Barclays, a veteran British brokerage, also pointed out in a recent outlook report that “next year will be one of the weakest years for the global economy in the past 40 years.” Due to the impact of the Federal Reserve’s “violent interest rate hike” on the economy The side effects of this will eventually appear next year. With the Fed’s interest rate hike cycle coming to an end in March next year, pushing up the terminal interest rate to a range of 5-5.25%, the U.S. economy will inevitably fall into recession.
“Recession” is the number one keyword in looking forward to next year’s economy. As for another keyword, it is still the number one enemy that plagues the world’s central banks this year: inflation.
According to the forecast of the International Monetary Fund (IMF), the estimated global inflation rate in 2023 is 6.5%, although it is slightly lower than the 8.8% in 2022, it is still higher than the 4.7% in 2021, and it is still clearly in the “warning” of 3%. line”.
Talking regarding Taiwan’s economic outlook in 2023, Zhou Yutian, a part-time researcher at the Institute of Economics, Academia Sinica, said frankly that “next year’s situation will only be worse than this year.” On the one hand, Zhou Yutian pointed out that many recent economic leading indicators, such as consumer confidence and purchasing managers’ index, have shown a downward trend.
On the other hand, Zhou Yutian observed that since China launched the lockdown policy in April, although Taiwan’s total export orders have maintained positive growth, if you look closely at the industrial distribution, industries such as electronics, basic metals, machinery, and plastic and rubber products have all declined. Obviously turned into a recession, “I think next year’s exports will be much worse than this year.”
As for domestic demand, Qiu Dasheng, a researcher at the International Office of the Taiwan Institute of Economics, observed that Taiwan’s domestic demand momentum is expected to gain some support next year due to the unblocking and the opening of the border to foreign tourists. There is room for growth, and the reduction in wealth effects will curb consumption momentum. Therefore, the view on the economy next year is “cold on the outside and flat on the inside.”
On the whole, looking forward to 2023, the world’s major economies will experience different types of “trials”, but there is still a glimmer of “dawn” in the trials.
Many experts have mentioned that if we want to judge when the global economy will have the opportunity to “see the sun” in the next year, March will be a focus of observation.
First of all, March represents the end of winter. “At that time, winter in the northern hemisphere will reach a stage. If Europe survives the energy crisis, it means that the war between Russia and Ukraine should not be able to continue.” said Li Zhenyu, chief economist of Taishin Financial Holdings. In addition, many foreign investors have pointed out that following this winter, whether the new crown epidemic will cause a new pandemic will also be the key to whether China can “fully unblock” as scheduled.
Third, the central banks of all countries will meet in March to confirm whether the cycle of raising interest rates has come to an end. “At that time, we can also evaluate the specific damage to the economy caused by the rate hike.” Luo Wei, chief economist of Fubon Financial Holdings, pointed out. Fourth, following China’s two sessions in March, the personnel layout has been roughly finalized. “The financial policy will be more clear then,” Tao Dong said.
If there is a dawn, the global economy will have the opportunity to “brightness” ahead of time.
Source: “Weekly Today” Issue 1357
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